Latest ObamaCare Glitch Enables States to Block New Entitlement Spending

Investors Business Dailyreports on the latest glitch found in ObamaCare’s 2,000-plus pages:

Because of a quirk in ObamaCare, people who buy health insurance through a federally run exchange may not be eligible for premium subsidies.

Government-created exchanges are places for individuals to shop and purchase health insurance. ObamaCare will require individuals and families to buy insurance, starting in 2014.

Those with incomes at 100% to 400% of the federal poverty level will be eligible for taxpayer funded subsidies — a tax credit to help pay for the premium.

It turns out that the legislation isn’t so clear, the latest example of what analysts predicted would be a stream of surprises from the mammoth health law.

Section 1311 of ObamaCare instructs state governments to set up an exchange. If a state refuses, Section 1321 lets the federal government establish an exchange in the state.

Yet ObamaCare states that the tax credit is available to people who are enrolled in an “an exchange established by the state under (Section) 1311.” It makes no mention of people enrolled in federal exchanges being eligible for the tax credit.

“There is this technical problem in the law,” said James Blumstein, a professor at Vanderbilt Law School. “I don’t see how you get around that.”

I guess the folks who chanted, “Read the bill!” seem a little less crazy now.

Regrettably, the IRS has tried to “get around” the clear meaning of the law. In a proposed rule, the IRS writes that taxpayers will be eligible for ObamaCare’s “tax credits” – which are more government spending than – if they are enrolled in a health plan “established under section 1311 or 1321” [emphasis added]. But that’s not what the law says. As I told IBD:

“Congress did not delegate this discretion to the IRS,” Cannon said. “Congress created a tax credit for A, and the IRS is saying it applies to A and B. If the IRS offers this tax credit to federally run exchanges, the IRS will be assuming powers the Constitution vests only in Congress to alter the tax code and spend money.”

Citizens have until October 31 to share with the IRS their thoughts about the agency’s overly broad interpretation of its powers (see here).

More broadly, this bug feature means that states can block ObamaCare’s new entitlement spending, and possibly the entire law, just by refusing to create an Exchange:

“The whole structure of the law collapses without a state-run exchange,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute. “That forces Congress to either repeal ObamaCare or significantly alter it.”

The Select Committee is getting to work, and I encourage both parties, all 12 members, to put the Affordable Care Act on the table, alongside other entitlements in need of reform…The easiest money to save is money you haven’t yet spent…This new select committee could easily achieve almost their entire target of reducing the nation’s deficit, and…almost every dollar would come from benefits that do not yet exist.

The wonderful thing about this newly discovered feature of ObamaCare is that states don’t have to wait for Congress to act. They can reduce federal spending simply by not creating a health insurance Exchange.